Deficits foster our ability to export

Deficits foster our ability to export

Date:

Thu, 08/08/2013

Chinese consumption and U.S. production are growing at the same rate.

by Amanda Smith, Hoard’s Dairyman Associate Editor

Sourcing safe, local raw milk remains expensive in many nations. Countries that are currently in a milk deficit will continue to struggle with its scarcity. Comparatively, the EU and U.S. are in a surplus situation. Their growth will be seen in markets that are in a deficit. “To meet these needs, there will be an ongoing expansion of trade. Who is poised to take advantage of the opportunity?” asked Tim Hunt, Global Dairy Strategist with Rabobank.

China and Africa are amongst the fastest growing, but India owns the growth space when discussing dairy demand.

Yet, Chinese consumption growth has slowed. Around 2001, consumption rose 21 percent per year. By 2007, this had slowed greatly to 8 percent. Currently, Chinese consumption is growing at 4 percent per year. While it is significantly lower than a decade ago, the size of the nation’s population cannot be ignored.

At the same time, the cost to produce milk in most regions of China has risen astronomically, limiting production expansion. There is also speculation that Chinese production is stagnant or declining.

In 2001, China’s milk production was expanding 20 percent annually. This, too, has slowed – now the nation’s producers are expanding production at a mere 1.5 percent per year. Production growth is not keeping pace with expanding demand.

The Chinese deficit in milk production almost matches current U.S. year over year growth. China’s deficit is our chance to play in the export market. As other countries step up to the plate to meet their demand, we can fill the gap in Latin America and Africa.

Traditional exporters are running out of room for growth. New Zealand’s productive growth capacity has slowed from a torrent to a trickle. Since the 1990s, exporters in Oceania have grown production at 5 percent per year. This may continue to slow to a 2 percent annual growth over the next five years as additional land and environmental compliance pressures crop up.

Our nation is taking steps toward becoming better exporters. Plants are being tweaked to make export products other countries desire. New plants, too, are being built to service the export market. Market access has improved as relationships with offshore customers have strengthened.

But recent Oceania premiums, which are at record levels, are testament to the job the U.S. industry still has ahead of them. Progress has been made, but we are not there yet.

The author is an associate editor and an animal science graduate of Cornell University. Smith covers feeding, milk quality and heads up the World Dairy Expo Supplement. She grew up on a Medina, N.Y., dairy, and interned at a 1,700-cow western New York dairy, a large New York calf and heifer farm, and studied in New Zealand for one semester.